Tips for Investors – How to Land a Profitable CRE Deal

Commercial real (CRE) is a significant part of any investor’s portfolio and offers several rewards and benefits. Commercial properties fare better when compared with other asset classes as they offer a better return on investment and ensure a relatively consistent stream of income. No wonder, CRE has turned into a highly profitable and rewarding investment.

Here are a few tips to help you strike a good commercial real estate deal:

1. Design an action strategy

The best commercial real estate deals are scored with the help of a solid action plan. Even before stepping into the CRE market, ask yourself some important questions like: What is the outer limit of your budget? How much rental space do you need to lease out? What are your monetary expectations from the deal? The answers to these questions will help you secure long-term assets that fetch high returns.

2. Spot good deals

There is no single tool to find good CRE deals and you must be sharp and adaptable in your approach. To find the best investment opportunities read classifieds, scan property portals or hire experienced professionals. While considering properties assess the risk carefully and look for any damage that needs immediate repair.

3. Examine physical condition of the property

Before shortlisting an older property, get an idea of the wear and tear it has gone through. This will help you ascertain its rental income, scope for expansion as well as resale value for the future. In case of an under-construction property, carefully consider the developer’s track record and ability to deliver the project on time.

4. Assess market value

Before inking any CRE deal, it is vital to evaluate the current market rate of the property’s location. Apart from the basic price, additional costs like maintenance, building insurance, power backup and other infrastructure fees should not be ignored. Remember to check the rental return in the area if you wish to further lease out the office space. In case you have plans to resell the property, find out the price appreciation and expected resale value.

5. Legal due diligence

Like any other real estate asset, a commercial property should have a clear title and should be free from any legal litigation. Take the help of a CRE expert and real estate lawyer to carry out thorough legal and technical due diligence. In the case of any legal encumbrance or shortfall in the specifications, you can either re-negotiate or even consider exiting the deal.

It takes time and patience to strike a profitable commercial real estate deal, so do not rush before being sure on all the above factors. Investment in CRE requires extensive research and some amount of risk and it’s advisable to seek expert opinion to help you make the right decision.